WED 21 - 8 - 2019
Date: May 11, 2019
Source: The Daily Star
Lebanon: Cabinet OKs raising tax on interest from bank deposits
Hussein Dakroub| The Daily Star
BEIRUT: Meeting against the backdrop of renewed street protests by military veterans against proposed cuts to their wages and retirement benefits, to discuss a draft austerity budget, the Cabinet Friday approved raising taxes on interest from banking deposits from 7 to 10 percent for three years.

The Cabinet also said that only soldiers deployed against the “Israeli enemy” in south Lebanon would benefit from financial incentives designed for front-line troops.

It confined the implementation of Measure No. 3 relating to end-of-service compensation for armed forces personnel to officers and soldiers serving at the front line with Israel.

According to the resolution, end-of-service benefits for military personnel who served in high-risk areas will include three years’ worth of salaries for every year of employment.

“It was somehow a long session, but it was very productive in the issue of pending items, most of which were approved, namely raising the tax on interest rates on banks and individuals, from 7 to 10 percent for three years,” Information Minister Jamal Jarrah told reporters after the five-hour Cabinet session chaired by Prime Minister Saad Hariri at the Grand Serail.

“After three years, the tax returns to 7 percent, and our financial and economic situation would have improved. If there is further improvement, we may reduce it to less than 7 percent, perhaps to 5 percent.”

The increase had been strongly opposed by banks.

On the sensitive issue of military retirement, Jarrah said the Cabinet approved an increase in the retirement age for the military sector.

Early retirement at 18 years of service was increased to 23 years, and retirement after 20 years of service to 25 years. Other specialized officers would experience an increase of three years to their retirement age.“The Cabinet will implement the law that states that Measure No. 3 is [applied to officers and soldiers] confronting the Israeli enemy,” Jarrah said.

He said it was left to military and security commanders to determine the cases they considered should be dealt with under the measure. He added that the defense and interior ministers would make proposals on this issue.

Jarrah said no decision had been made yet on the divisive issue of proposed cuts to public-sector employees’ wages and end-of-service benefits, including medical and education assistance, a hot topic that had ignited a wave of strikes and protests by labor unions and retired military personnel, as well as employees of the Central Bank, in the past two weeks.

“We will decide on this [proposed cuts to state employees’ salaries] once we are done with the figures [of other sectors],” Jarrah said, adding that the Cabinet was intending to reduce education assistance to public-sector employees by 15 percent.

Friday’s was the ninth Cabinet session in a series of meetings devoted to examining the draft budget, which seeks to reduce state spending and generate revenues in order to cut the deficit, a key demand of international donors.

The session was dedicated to agreeing on proposed reductions to public-sector employees’ salaries and social benefits as part of austerity measures. The Cabinet Thursday decided on a 20 percent funding cut for all ministries as part of the austerity measures, which seek to reduce the deficit to 8 percent of GDP, down from more than 11 percent in 2018.

Last year’s budget deficit was estimated at $6.7 billion, or 11 percent of gross domestic product, though the final figures have not been released.

Jarrah said the Cabinet had not yet taken a decision on proposals for a 50 percent cut in the salaries and benefits of ministers, lawmakers and former MPs.

“No decision has been made yet on the 50 percent cut or less. Everyone knows that there are lawmakers and ministers whose sole income is this salary,” he said.

“There are other lawmakers and ministers who have been made rich by God, while there are ministers and lawmakers who live from this income.”

Jarrah stressed that “public authorities,” a reference to ministers and lawmakers, had to contribute to reducing the budget deficit.

“The atmosphere is very positive with regard to big reductions in the salaries of public bodies. We did not set a percentage. There was a proposal for a 50 percent cut and proposals for less. God willing, we will take a decision either Sunday night or Monday noon,” Jarrah said.

“God willing, we hope to finish Sunday night. ... We are in a hurry because eventually this budget will have to be referred to Parliament [for final ratification],” Jarrah said.

Ahead of the Cabinet session, Foreign Minister Gebran Bassil met with Speaker Nabih Berri, discussing with him the austerity measures envisaged in the 2019 budget.

“We will work toward a serious budget and we will come together in order to come out with measures that will relieve people,” Bassil told reporters after meeting with Berri at the speaker’s Ain al-Tineh residence.

“There are reforms that all of us must carry out. Why don’t we do it? Hence, the importance of political solidarity.”

Bassil, the head of the Free Patriotic Movement, sounded optimistic about overcoming the economic crisis. “The future is promising and the solidity of our banking and monetary situation is still good. We are capable of emerging from this situation,” he said.

As the Cabinet met, dozens of retired military personnel and their families staged a sit-in on Riad al-Solh Square as part of their protests against proposed cuts to their wages and retirement benefits.

The veterans chanted, “They are all thieves,” in reference to the ministers, as they burned tires in the middle of Riad al-Solh Square.

They told reporters they felt the smell would be more likely to reach ministers than their voices.

“We are in favor of removing all articles that affect retired military personnel,” one protestor said, referring to proposed cuts to veterans’ wages and end-of-service benefits, including a 3 percent cut to military pensions.

Strong Lebanon bloc MP Chamel Roukoz, himself a veteran, said the protests were not just in the interests of veterans but all military personnel. “We are very keen to reduce the budget deficit,” he said, adding that poor and middle-class families should not be expected to pay for the reduction.

Defense Minister Elias Bou Saab briefly joined the protesters to reassure them that he was listening to their demands.

“Every day after every [Cabinet] session I meet with you and keep you in the loop. You don’t have to be in the streets today. I am behind you on this issue,” Bou Saab told protesters.

But a statement from the protesting veterans described the government’s approach to negotiations as “far from ... discussion and justice, and closer to the logic of force by threatening taxes.”

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